«Self-Help in the Digital Jungle Kenneth W. Dam THE LAW SCHOOL THE UNIVERSITY OF CHICAGO This paper can be downloaded without charge at: The Chicago ...»

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CHICAGO

JOHN M. OLIN LAW & ECONOMICS WORKING PAPER NO. 59

(2D SERIES)

Self-Help in the Digital Jungle

Kenneth W. Dam

THE LAW SCHOOL

THE UNIVERSITY OF CHICAGO

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An earlier version of this paper was published as Chicago Law and Economics Working Paper #59 (August 1998). The following article is a revision that has been accepted for publication in the Journal of Legal Studies, vol. XXVIII (2) (June 1999)† and is reproduced with permission of the editors and author.

SELF-HELP IN THE DIGITAL JUNGLE*

Kenneth W. Dam** A word about my title: “Digital jungle” is designed to evoke a content provider’s perspective on the dangers to be run in putting valuable content on the internet. “Self-help” refers to an expanding set of technologies and systems designed to protect content from unauthorized copying and to facilitate electronic commerce involving content. I use “content” broadly to include text, data, images, audio, video, and all of the other media that patrons of the web are familiar with.

There may be a jungle out there, but if so it is an exceedingly fertile one. From every perspective the internet is growing at an astonishing rate and in steadily more diverse directions. I see no reason to repeat all of the projections on the opportunities for creation of on-line communities, the flourishing of political speech in totalitarian states, and the potential growth of on-line publishing and electronic commerce. The projections and estimates grow steadily, on the basis of faster than anticipated adoption.

** Max Pam Professor of American and Foreign Law, University of Chicago Law School. An earlier version of this paper was given at a conference of the New York University Law School Engelberg Center on Innovation Law and Practice held in La Pietra, Italy, in June 1998. The proceedings of the conference will be published by the Oxford University Press in a book edited by Rochelle Dreyfuss entitled “Expanding the Bounds of Intellectual Property: Innovation Policy for the Knowledge Society.” I should like to thank for their comments and suggestions the participants in that conference and, in addition, Eliot Dam, Jack Goldsmith, William Landes, Douglas Lichtman, Henry H. Perritt, Jr., Richard Posner, and Cass Sunstein. And for generous support of the research for this paper I thank The Sarah Scaife Foundation Fund and The Lynde and Harry Bradley Foundation Fund.

JLS XXVIII (2) June 1999 (reproduced w/ permission) 2 interfering, for example, with “user rights.”1 In my view, self-help systems will not only reduce the incidence of copyright violations and be one of the crucial success factors in electronic commerce but, more specifically, these systems are likely to evolve to meet most of the concrete objections of those who criticize such systems from an intellectual property doctrinal point of view.

Self-help systems will never meet, however, the goals of those who believe that the internet should be “free.” Nor should we expect them to meet those goals. On the contrary, it would be an error in economic policy to adopt rules that would de facto incapacitate selfhelp systems. In any case, it is not my purpose to debate with those who, in the name of user rights or of freedom of the net, would effectively emasculate copyright. I take copyright law as given and as desirable and indeed necessary intellectual property law. Since selfhelp systems can greatly limit unauthorized copying of copyrighted materials, there is not necessarily any need to rewrite copyright law to fit the on-line environment. But I do not limit the value of selfhelp systems to protection of copyrighted content. Self-help systems also protect uncopyrightable and uncopyrighted (including public domain) materials. And because they do so by facilitating contracting between content providers and users, they should not be viewed as conflicting with the intellectual property law of copyright.2 Many intellectual property commentators have analyzed the issue as one of copyright law. Those who dislike self-help systems often have the conception that fair use should necessarily be interpreted as broadly as possible. Exaggerating only a little, one can say that in their eyes the key principle, especially in the on-line world, should be free use, and that copyright should be considered an exception.

This theme is especially strong in the writings of those who emphasize “user rights.” For critical comments on the user rights approach, see Jane C. Ginsburg, Authors and Users in Copyright, 45 J. Copyright Soc’y 1 (1997).

See ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996). Compare Aronson v. Quick Point Pencil Co., 440 U.S. 257 (1979). The view stated in the text concerning the relationship between contract and copyright is obviously controversial. I state it as a conclusion as to the desirable policy outcome and do not, in this comment, attempt to deal with all of the technical legal issues raised by a number of writers on this subject. I do note, nevertheless, that the case law finding preemption of contracts by intellectual property law is quite limited.

References to the shrink-wrap cases are irrelevant because the issue in those cases is whether there is a contract in the first place. Finally, the notion that “click-on” instantaneous contracts are contracts of adhesion and therefore somehow invalid 3 Self-Help in the Digital Jungle The views one brings to the table in this area depend a great deal on where one enters the thicket of legal, ethical, and policy issues involved. My own perspective is that electronic commerce can, if promoted through appropriate legislation and left relatively free from impediments to free and open contracting, be as important to the next century as the industrial revolution was to the late eighteenth and early nineteenth centuries. I base this unprovable conjecture on the twin propositions that our society is predominately and increasingly a service society, and that the service portion of the society is increasingly based on information. Electronic commerce may be useful for groceries and the host of other things that can now be ordered on the net for delivery through the mails and delivery services, but the big payoff lies in information, which cannot only be ordered but delivered electronically.

Mine is not, I suspect, the perspective of most intellectual property scholars. Most of those who write on self-help are particularly interested in copyright law. I shall not attempt to deal here with all of the copyright and even constitutional points that have been raised to question the propriety and legality of using selfhelp systems.3 Those are important issues but, as I shall argue, they place too much weight on one side of public policy scales.4 finds little support in the case law. See Tom W. Bell, Fair Use vs. Fared Use: The Impact of Automated Rights Management in Copyright’s Fair Use Doctrine, 76 N.C. L. Rev. 557, 607–8 (1998). Even if they were contracts of adhesion, that would mean only that courts could scrutinize the contracts more closely for ambiguities or for unconscionable terms and conditions. See, for example, Fireman’s Fund Insurance v. M.V. DSR Atlantic, 131 F.3d 1336 (9th Cir. 1998).

One line of concern about self-help systems is that they involve possible invasion of a user’s privacy. See Julie E. Cohen, Some Reflections on Copyright Management Systems and Law Designed to Protect Them, 11 Berkeley Tech. L.

J. 161, 183–87 (1997). Privacy for on-line users is a general concern that needs to be dealt with, and it is in no way limited to self-help systems. The Digital Millennium Copyright Act, discussed below, deals in part with this concern by allowing circumvention of a self-help system to the extent that it "contains the capability of collecting or disseminating personally identifying information reflected in the online activities of a natural person" without allowing that person an ability to opt out of the collection or dissemination of that information. 12 U.S.C. § 1201.

A different issue is how much self-help systems will actually contribute to the growth of electronic commerce in information. Clearly there are a variety of JLS XXVIII (2) June 1999 (reproduced w/ permission) 4 The current state of legislation is that the Congress, in the Digital Millennium Copyright Act of 1998, recognized the need to protect both self-help systems against circumvention and fair user rights in the context of such protection. In an all too typical compromise, the Congress, unable to balance these two somewhat conflicting objectives, delegated the task to the Librarian of Congress, who is to determine in a rule-making proceeding the extent of a fair user exception to the Act’s general prohibition against circumvention of any “technological measure that effectively controls access to a work protected” under the Act.5 Because the Act protects only copyrighted works and the Congress specifically dropped any protection of databases, the legislation says nothing about self-help systems in the uncopyrightable database context. After considering the nature of self-help systems and the values at stake in their use, I shall review briefly this legislation.

I. SELF-HELP SYSTEMS

The two most important factual points about self-help systems are, first, they are here now, and second, they are, of course, still quite primitive compared to what experience suggests they are likely to become. I shall describe briefly what now exists and what one can expect, especially with the right incentives, only a few years from now. Both because of the demand for self-help systems and the rapid growth of sophistication in software programming, one may expect them to be much more sophisticated in the next few years (especially if government and the courts do not get in the way). The special business models for providing information on the web, not all of which require the same protection of content. Dyson, in an illuminating discussion, concludes that selling copies through self-help systems is unlikely to be the dominant business model because “there’s all that competing stuff for free.” Esther Dyson, Release 2.0, at 154 (1997). Many business models involve free use of content to sell something in the off-line world. This does not mean, however, that self-help systems will not play a crucial role in one important part of what seems destined to become an enormous on-line market. On the question of business models, the fact that copy-protection systems for software fell out of favor due to buyer resistance should, of course, make one cautious about predicting unqualified market success for self-help systems. See Henry H. Perritt, Jr., Property and Innovation in the Global Information Infrastructure, 1996 U. Chi. Legal F. 261, 303–4.

17 U.S.C. § 1201(1)(A).

5 Self-Help in the Digital Jungle importance of the rapid evolution in self-help technology is that it holds out the possibility of helping to achieve the objectives of both the proponents and opponents of self-help systems.

These systems are often called copyright management systems, but the underlying information need not be copyrighted. It may be protectable, say as a trade secret, where the use of such a system will help the trade secret owner to demonstrate that all reasonable steps have been taken to keep the information secret (or, better still, to avoid the leakage of the information in the first place and hence the necessity for litigation). Or the underlying information may not be protectable at all. It may be just a compilation or purely factual, or indeed it could be information for which a third party owns the copyright—for example, it may be pirated content.6 I shall use the phrase “self-help systems” rather than “copyright management systems” for two reasons. They can and will be used for noncopyrighted content. And the word copyright is likely to make us dwell too much on copyright doctrine rather than on the underlying goals and values we would like to promote in an information society.

I also avoid the term “rights management systems” because I see little reason to get into a case-by-case analysis as to whether the content is copyrightable or otherwise independently protectable by legal action. After all, telephone books have a convenience value, even if not copyrightable. We surely would not argue that because telephone books in tangible form normally cannot be copyrighted, it should be lawful simply to steal them. To permit outright theft would make consumers worse off, not better off, because although theft may be just an economic transfer, the “sweat of the brow” investment in time and money required to generate them warrants encouragement. This is not a legal argument nor necessarily a plea for intellectual property protection for telephone books, but simply an observation that allowing people to protect by their own means what they create is usually socially optimal where the law does not provide a cheaper, more effective remedy.7 That is the central In the last case, self-help systems may be used to facilitate piracy. Thus, a music pirate might send copyrighted music to a wide circle, whether for personal or commercial reasons, within a cryptolope in order to avoid being detected by the copyright owner. See the discussion of cryptolopes below.

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